JPMorgan: Here's The One Way We Could Have A Really Severe Recession

The risk of a more severe recession appears to lie in the interaction of weak growth and policy responses.

Now at this point, JPMorgan is putting a 40% chance of there being a small recession, but the above line is very important, and really captures the essence of the problem.

See, we're at an ironic time when bad economic data actually increases the odds of a pro-cyclical economic response, as the ongoing weakness strengthens the hand of the pro-austerity GOP opposition. Conversely, bad data diminishes faith in counter-cyclical policies, like the stimulus Obama proposed earlier this week.

Thus for the time being—probably at least through the 2012 election—every data point is likely to have a magnified impact, as the direct political impact is so pronounced.